The Monarch Casino & Resort has reported a healthy balance sheet despite the huge losses recorded in 2020. The big question now is should investors trust the Monarch Casino & Resort balance sheet?
Usually, most businesses quickly display their profit margin and barely declare all their debt and liabilities. They often find a way to hide it and give investors the impression that all is well. Meanwhile, the online casino industry nowadays displays its profits in real-time compared to land-based casinos.
Is that the case with Monarch Casino & Resort? Not really, but let’s take a look.
Critical Analysis of Monarch Casino & Resort’s Debt and Liabilities
The latest balance sheet showed that by the end of June 2021, Monarch Casino & Resort had a total debt profile of US$132.4m. Meanwhile, in June 2020, Monarch Casino’s debt was US$206.7m. Also, they had US$28.3m in cash, therefore Monarch Casino & Resort’s net debt is US$104.1m. Furthermore, the liability of Monarch Casino & Resort is US$123.9m due within a year. Before now, they had offset US$141.9 within a year. With cash of US$28.3m and US$33.7m worth of receivables due in one year, Monarch Casino & Resort liability is a total of US$203.7m. In other words, this is more than the cash and near-term receivables put together.
These debts and liabilities were incurred last year. Like most land-based casinos, Monarch Casino had to borrow to carry out some financial responsibilities. Before the pandemic, Monarch Casino was one of the most financially stable land-based casinos. As you would expect, Monarch Casino attracted many investors because of the declared huge profit margins. Assuming Monarch Casino has some ties to the online casino market, they would make a lot of money. The online real money gambling industry has been booming since the pandemic.
Does Monarch Casino & Resort Liabilities Pose any Threat to Investors?
With a market capitalization of US$1.23b, it is very hard to believe that Monarch Casino & Resort debt poses any threat. Compared to Monarch Casino & Resort, they are other casino operators that have a worse debt profile. Besides, a company’s debt is not measured by just looking at the net debt. Usually, the net debt is divided by its earnings before tax, interest on loan, depreciation, and amortization. Financial experts use this method to check the absolute quantum of debt and the interest rate paid.
Presently Monarch Casino & Resort’s net debt is just 1.2x of its Earning Before Interest, Taxes, Depreciation, and Amortization (EBITDA). Also, Monarch Casino EBIT is above its interest expenses. Monarch Casino EBIT is 16.8x the size of the interest on the loan. Interestingly, Monarch Casino EBIT increased by 236 percent in 2020. Considering the pandemic, that was an impressive improvement.
If Monarch Casino EBIT percentage continues to increase, it will help the company manage the debt. Financial experts focus more on the balance sheet when scrutinizing debts. According to experts, to maintain a healthy balance sheet, Monarch Casino & Resort’s future earnings must increase.
Meanwhile, Monarch Casino has done a lot of spending to increase their business. Nonetheless, this doesn’t take away the debt’s risk if their future earnings don’t increase.
Overview of Monarch Casino & Resort
Monarch Casino & Resort was incorporated in 1972. Furthermore, they currently employ more than 1700 staff. No doubt, Monarch Casino & Resort is one of the biggest land-based casinos in Nevada.
Also, Monarch Casino has more than 100 rooms, and its venue is one of the biggest in Nevada. Initially, like other casinos, Monarch Casino & Resort was also shut down and couldn’t operate.
Other subsidiaries of Monarch Casino & Resort are Golden North INC., Golden Town INC., High Desert Sunshine INC., Monarch Interactive INC., and Golden Road Motor Inn INC. Also, the headquarters of Monarch Casino & Resort is in Reno, Nevada, United States.
Expert View of Monarch Casino & Resort
After Monarch Casino & Resort released its balance sheet, most financial experts provided in-depth analysis. From the summary of their analysis, based on their EBIT, there is no cause for alarm. Interestingly, experts are impressed by their interest.
Also, proper debt management will help Monarch Casino & Resort maintain a healthy balance sheet for a long time. However, shareholders need to keep a close eye on Monarch Casino & Resort’s growth, although there is no cause for alarm yet.
The Future of Monarch Casino & Resort
Monarch Casino & Resort’s balance sheet is quite impressive compared to other land-based casinos in Nevada. However, investing in online casinos is one way for Monarch Casino & Resort to reduce its debt and liabilities. Besides, online gambling is legal in Nevada.
It’s a known fact that online casinos were barely affected by the pandemic. Therefore, Monarch Casino ought to tap into the opportunity that online gambling provides. Monarch Casino needs to tap into the online casino break with the Nevada Gaming Control Board flexible licensing methodology.
Finally, Monarch Casino has a brighter financial future compared to other land-based casinos in Nevada. Getting an online gambling license from the Nevada Gaming Control Board would be an added advantage.